The New Paradigm for Financial Markets: The Credit Crisis of 2008 and What It Means

The New Paradigm for Financial Markets: The Credit Crisis of 2008 and What It Means | George Soros | briliant

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The New Paradigm f...

	The New Paradigm for Financial Markets: The Credit Crisis of 2008 and What It Means George Soros PublicAffairs, 2008 - 208 pages average customer review:based on 56 reviews view larger image
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Soros at his best

Don't buy this book if you're looking for an in depth analysis of the credit burst. There are many other books out there with depth. Buy this book if you love (or curios about) what one, if not the GREATEST MIND IN THE MARKETS, thinks currently (well, with a bit of delay).

ON REFLEXIVITY; Soros finally explains his philosophy of reflexivity clearly. He 'failed' in his book Alchemy of Finance and left millions of readers like me puzzled. That's already worth the price of the book. He offers his philosophy as an alternative for the market equilibrium theory. Hence the titel of the book. A new pardigm.

THE SUPER BUBBLE HYPOTHESIS; short and to the point, Soros explains his hypothesis. he sees two bubbles: the super bubble and the real estate bubble. get ready, it's gonna be nasty.

Soros shows some major mistakes been done in the financial system, the consequences, and potential solutions. Simply Soros at his best.

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I agree with Sosors predictions on market crisis...i particularly enjoyed the second half of the book which focussed more on the market and his theory on how the crisis would unfold...if u r not interested in philosophy or mathematics, just open the book in the middle and read the rest to the end! Soros is still a market genius.

Soros Gets Two Thumbs Up

I recommend Soros' "The New Paradigm for Financial Markets: The Credit Crisis of 2008." He's the back out of retirement billionaire hedge fund mogul who brought down the English pound and is blamed for the Malaysian economy's demise during the Asian economic crisis. His calling card is exploiting currency arbitrage opportunities. I recommend this book for two reasons: First, he is a smooth and elegant writer, which is nice if you appreciate the English language and a readable book. Second, he really writes on a secondary market problem, which is the real problem since it is huge due to the world of derivatives. You may need Investopedia to help translate some of what he describes, then again, you may not. As an added bonus, Soros delivers his philosophy on the markets and confirms what many already know - perception is reality and it is unpredictably dynamic. Most people understand the problem on Main Street: 6.5 million foreclosures by 2012 and $2 trillion in credit losses. Few understand the bigger problems coming from Wall Street that is closer to $40 or $50 trillion in size. The U.S. economy is $14 trillion in size. Soros helps make these matters clear. This is not reading for the faint of heart with a cup of hot chocolate in warmed hands. This is scotch and water on the rocks reading.

Peter Hebert
Author of Mortgaged and Armed
www.MortgagedAndArmed.com

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Theorists Abound

Whether we find ourselves in the aftermath or the subprime mortgage crisis, or still very much in the development of its full repercussions, there has been no shortage of industry icons trying to make sense of a catastrophic series of events that were not foreseen by an army of proprietary risk models that failed to forecast a fundamental weakness in debt markets.
Enter George Soros, the philosopher turned money manager whose special brand of socioeconomic theory stands in the face of three centuries of equilibrium theory since its birth in the pages of Adam Smith's Wealth of Nations. His theory of reflexivity propounds the idea of a two-way connection between objective and subjective aspects of reality that essentially alter each other in a reflexive manner. This abstract concept has been aptly applied to the financial markets in his 1987 text, The Alchemy of Finance, and all the more so to a general insight into the instabilities of the lending industry, specifically our most recent turn of events, in The New Paradigm for Financial Markets (2008).
While his opinions have been constantly scrutinized in academic circles for completely disregarding equilibrium theory and rational expectations, now may be the time to give reflexivity its fair due. It may not have the theoretical predictive power of traditional economic theory, but it surely makes more intuitive sense to even the most detached bystander in such "far-from-equilibrium" situations as the one in which we are currently enmeshed. There is a certain ease in being able to analyze the circumstances of an asset bubble in hindsight, be it observing the skyrocketing numbers of debt-to-GDP and specifically a housing boom as a result of negative real interest rates following the attacks on the World Trade Center, but few have been prepared to challenge the very infrastructure of the financial markets themselves.
Mr. Soros has some piercing words for the apparent efficiencies of free-market lending, especially in the context of an economy that has embraced financial services as their competitive advantage in a globalized market. The perpetrators of this crisis have, indeed, been the torchbearers of a free market ideology that has forged a religious following. Whether the time has come to add some disclaimers to an ideology peculiarly susceptible to such drastic booms and busts of the last few decades, it is up to the convincing manner in which Mr. Soros passionately states his case against its most passionate disciples. If that is not enough, he would have to resort to allowing his performance record of the last 40 years speak for itself.

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Surprise, surprise -- Republicans and free markets caused the credit crisis and Democrats will regulate us out of it

Alan Greenspan's Ayn Rand - inspired political views are responsible for the real estate bubble (the truth is that Freddie and Fannie with support from Democrats started the bubble with loans to people who could not afford them and Republicans including Greenspan tried prevent that by reforming Freddie and Fannie but were voted down by the Democrats). An "excessive reliance on the market mechanism" by Republicans and "market fundamentalists" who don't understand the Soros Paradigm -- Lack of a tendency towards equilibrium in financial markets -- (this seems to be repeated on every other page) created the "super bubble".
Actually a case can be made that government regulation gave birth to this "super bubble". Democrats like Barny Frank and Chris Dodd got the bubble going by pushing, on a massive scale, reverse redlining (giving loans to unqualified people). This Democratic over-reaction to redlining (denying loans to people who can afford them) is not discussed by the author in a forthright manner.
"Only a Democratic president can be expected to turn things around and lead the nation in a new direction. The new direction will be less reliance on the market mechanism and more reliance on more government regulation. But today as we are going through the worst financial crisis since the Great Depression more regulation of markets (including massive bail outs) is unavoidable and is being put in place by a Republican Administration as I write. If the Republicans do not get it right. Soros and Obama may well get their chance to put the market mechanism into strangle hold outlined in this book. They could destroy the power of creative destruction by wrapping it up in red tape. Economic growth could be stifled for decades.
The author's discussion of social science and natural science and supply and demand curves is done much more clearly in numerous fine textbooks. What you can't get out of textbooks or anywhere else is the back pain and spasms that Mr. Soros got at the right time. They were his early warning signs about his positions on the market. These early warning signs apparently helped him make billions. If this book does cause some readers to get a spasm it won't be the money making kind.

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